Report 2011-120 Recommendations and Responses in 2014-041

Report 2011-120: California Department of Transportation: Its Poor Management of State Route 710 Extension Project Properties Costs the State Millions of Dollars Annually, Yet State Law Limits the Potential Income From Selling the Properties

Department Number of Years Reported As Not Fully Implemented Total Recommendations to Department Not Implemented After One Year Not Implemented as of 2013-041 Response Not Implemented as of Most Recent Response
Department of General Services 2 15 2 2 1
Department of Transportation 2 26 5 5 4

Recommendation To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should clarify the waiver process in the administrative order governing the small business participation goal.

Response

Subsequent to the audit, DGS significantly changed its policies, procedures and responsibilities for procurement which alleviates the need for this recommendation. Specifically, effective July 1, 2013, DGS consolidated its purchasing and contracting functions in a new office within its Administration Division, the Office of Business and Acquisition Services (OBAS). Consequently, the Direct Construction Unit (DCU) is no longer responsible for those activities. Instead, the responsibility rests with OBAS' professional procurement staff.

DCU's role in the new procurement system is primarily limited to requesting a purchase and certifying the receipt of the goods. OBAS is now responsible for ensuring that DGS procurement practices fully comply with state and DGS requirements. This responsibility includes complying with DGS policies which require the procurement of goods and services under certain dollar thresholds from certified small businesses (SB) and disabled veteran business enterprises (DVBE). In recognition of the consolidation of the purchasing and contracting functions, a recently issued administrative order addressing, in part, the award of contracts to SBs and DVBEs no longer includes provisions for the waiver process discussed in the state auditor's report.

  • California State Auditor's Assessment of Status: Resolved
  • Completion Date: August 2014
  • Response Date: October 2014

Recommendation To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should continue its efforts to implement regulations that govern the small business certification process related to defining and enforcing violations of commercially useful function requirements.

Response

As noted in our previous status reports, the DGS planned to embark on a comprehensive revision of the small business (SB) regulations, including commercially useful function (CUF) provisions, upon the issuance of new disabled veteran business enterprises (DVBE) regulations. The DVBE regulations were issued in April 2013.

At the time of our August 2013 status report, DGS' Office of Small Business and DVBE Services (OSDS) had begun working on the SB regulation revision process and roughly estimated that the Notice of Proposed Rulemaking would be submitted to the Office of Administrative Law (OAL) in December 2013. However, subsequent to that update, OSDS workload associated with implementing FI$Cal, the state's new integrated financial management system, has taken priority delaying the SB regulation development process.

Currently, OSDS estimates that the proposed SB regulation notice will be submitted to OAL in December 2014. The new regulations will include CUF provisions which are consistent with those contained in the DVBE regulations.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: Unknown
  • Response Date: October 2014

Recommendation To: Transportation, Department of

To ensure that it collects fair market rents for the SR 710 properties on the State's behalf, Caltrans should, using the fair market rent determinations for all SR 710 properties it recently prepared and excluding those in its affordable rent program, adjust the tenants' rents to fair market after providing them with proper notice.

Response

As previously stated, Caltrans implemented the rental rate increases as of March 1, 2013, and rental rates are being gradually raised to fair market rent or to the Affordable Rent Level, whichever is applicable.

The tenants whose rent is more than 25 percent below fair market rent are subject to 10 percent rental rate increases every six months. The tenants whose rent is less than 25 percent below fair market rent are subject to annual rent increases of 10 percent. However, per the Affordable Rent Program (ARP) regulations, tenants in the ARP whose rent is below fair market rent or the Affordable Rent Level are now being increased on an annual basis only, based on yearly income calculations.

Rent increases are effective annually in April 1st and October 1st. Notices are sent to tenants sixty days or more before their rent increase becomes effective. The most recent rent increase notices were sent to 49 tenants on August 2, 2014, to be effective in October 2014. As of September 2014, there are 43 fair market rent tenants who received semi-annual rent increases effective October 1, 2014. The remaining six tenants in the rent increase list are on the October 1st cycle for their annual rent increase.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: to be determined
  • Response Date: October 2014

Recommendation To: Transportation, Department of

To ensure that it collects fair market rents for the SR 710 properties on the State's behalf, Caltrans should make only limited exceptions to charging fair market rent and document the specific public purpose that is served in any case that it does not charge fair market rent.

Response

Please see response to No. 1 - response applies to 1 and 2

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: to be determined
  • Response Date: October 2014

Recommendation To: Transportation, Department of

To ensure that the affordable rent policy is enforceable and that only eligible tenants receive the benefit of the policy, Caltrans should adopt regulations in accordance with the Administrative Procedure Act (APA) if the director determines that it is appropriate to continue to offer affordable rent to certain tenants.

Response

The Office of Administrative Law approved the Affordable Rent Program regulations on January 7, 2014. Tenants' household incomes are being annually reviewed using income certification forms as required in Caltrans' Right of Way Manual, Chapter 11.

  • California State Auditor's Assessment of Status: Fully Implemented
  • Completion Date: January 2014
  • Response Date: October 2014

Recommendation To: Transportation, Department of

To comply with the 2007 court ruling and the APA until such time as the Legislature may choose to act, Caltrans should establish regulations to govern the sales process for the SR 710 properties affected by the Roberti Bill.

Response

Caltrans solicited public comment on the text of the proposed Affordable Sales Program regulations (Roberti Bill) and held three public hearings during the summer. Caltrans will submit the final regulations to the Office of Administrative Law (OAL) and anticipates they will be adopted in early 2015.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: March 2015
  • Response Date: October 2014

Recommendation To: Transportation, Department of

To pursue alternatives to its management of the SR 710 properties, Caltrans should prepare a cost-benefit analysis to determine if the State would save money by hiring a private vendor to manage the properties. If such savings would occur, Caltrans should seek an exemption under Government Code, Section 19130 (a), to hire a private vendor.

Response

Caltrans and CalSTA are continuing to pursue the goal of eliminating Caltrans' role in managing SR 710 properties. Caltrans and CalSTA are currently in the process of adopting Affordable Sales Program regulations which will result in the sale of surplus properties beginning in 2015. A component of the Sales Program may result in contract management of all or part of the sales process by another entity. If so, the scope of work for the Sales Program may include some elements of property management. Therefore, Caltrans and CalSTA are no longer evaluating any of the three options investigated in the consultant's report.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: to be determined
  • Response Date: October 2014

Current Status of Recommendations

All Recommendations in 2014-041